Monday, August 12, 2013

How Starbucks Lost its Social License--And Paid £20 Million to Get it Back

I have a new column in Tax Notes International [gated] today, pdf available here, about Starbucks's £20 million promise to the UK after a firestorm of controversy erupted last year when it was revealed to have paid no taxes despite 14 years of franchise expansion in the country.

Abstract:

UK Uncut's logo for Starbucks Protests

It is well accepted that corporations require various legal licenses to do business in a state. But Starbucks’ recent promise to pay more tax to the UK regardless of its legal obligation to do so confirms that businesses also need what corporate social responsibility experts call a “social license to operate”. Companies may now in effect be required to pay some indeterminable amount of tax in order to safeguard public approval of their ongoing operations. This suggests that even as the OECD moves forward on a project to salvage the international tax system from its tattered, century-old remains, the tax standards articulated by governments will no longer be enough to guarantee safe passage for multinationals. Instead, companies may have to deal with a much more volatile, and fickle, tax policy regime: one developed on the fly by public opinion.

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